An investor buys a call at a price of $5.00 with an exercise price of $45. At wh

Question

An investor buys a call at a price of $5.00 with an exercise price of $45. At what stock price will the investor break even on the purchase of the call? (Round your answer to 2 decimal places.)

So, what is the break even price?

Can you post the process of this question intead of only an answer?

Thank you!

An investor buys a call at a price of $5.00 with an exercise price of $45. At what stock price will the investor break even on the purchase of the call? (Round your answer to 2 decimal places.)

So, what is the break even price?

Can you post the process of this question intead of only an answer?

Thank you!

Explanation / Answer

he bought the option at $45, by paying $5 premium. if he should stands at break even the option price should be $50.

that is the premium what he paid plus the purchase price. $5+$45= $50

the process is to buy the option, we need to pay premium to the option. if the option price is $10, and option premium is $2, it means the total cost will becomes as $10+ $2= $12. assume you paid $12 to purchase it. when you bought a product at $12, if you want to gain profit, you should sell it more than $12, right. if the option goes up higher than $12, all the above value is your profit. if the option expired at $16, your profit is $4.

suppose if the option is expired at $5, then your loss is only your premium, i.e. $2.

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